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Communities Are Learning How to Live With New Urban Logistic Centers

Until the 1960s, most of the land that we now call Bolingbrook, Illinois was nothing more than farmland. Around that time, developers saw an opportunity in cheap pastureland. The newly constructed Stevenson Expressway gave the area a newfound proximity to Chicago, a bustling industrial hub, making it a great candidate for a bedroom community. For a while Bolingbrook was the fastest growing suburb in Chicago but this growth didn’t come without some growing pains. Builders poured money into their housing complexes but did little for the local community. Water and sewage rates were so exorbitant that citizen complaints sparked a state ordered cut in rates to the privately owned local utility company. These pains are likely forgotten by most but the scar tissue shaped the nature of the town’s politics.

When Amazon wanted to add another warehouse to its already sizable, 7,000-employee presence in the area, the company was surprised to find opposition from the highest levels of local government. Indeed, Amazon was so sure that they would be able to expand in Bolingbrook that they purchased the land for their new facility before concluding talks with the municipality. Such as it was, when Bolingbrook’s mayor, Roger Claar, chose to block a new Amazon warehouse within city limits, he threw a tiny wrench in Amazon’s global machine. The property would provide 1,500 jobs, but for Roger, the downsides outweigh the positives. “I would like to see a diversity of businesses with a variety of jobs,” not to mention higher paid ones, Roger told Crain’s Chicago Business.

While this town of 75,000 battles one of the largest companies in the world, we have to remind ourselves of our personal culpability. We’ve all become accustomed to the convenience of buying our goods online, and we’ve grown too impatient to wait more than a few days for those goods to arrive. That number, the functional max requirement for the time it takes to deliver goods, is only dropping. As pointed out in our report, Retail & Robots, Amazon and others are hard at work building the infrastructure to be able to deliver goods to the vast majority of the population the same day that they ordered it.

To do this, suppliers need to have their most popular goods stocked in warehouses outside of major urban centers and have their last-mile delivery infrastructure within the busiest, most desirable parts of cities. Warehouses that are increasingly urban require much more attention to zoning and community concerns than do tilt-up boxes surrounded by miles of highways and forests. In time, cities and denser suburbs may refine their zoning laws to better reflect the modern need for urban logistics space. This will come with varied consequences. Take Houston, for example. That city, renowned for its lack of zoning regulations, was recently rocked by a substantial blast in an industrial building that leveled the property, killed two workers, and caused damage and injury in the surrounding areas, mostly neighborhoods.

Urban warehouses will not likely cause that kind of catastrophe, but they bring other downsides. Roger’s concerns also included the increased traffic that would come from an Amazon property in Bolingbrook. When delivery times are measured in days or even hours, the amount of trucks on the road necessarily goes up. Amazon will make deliveries all the way until 8pm, for instance. While this is in many ways an eCommerce issue and not a real estate one, bustling distribution centers in urban spaces will undoubtedly become a focal point of public ire at tech giants. Manhattan is already encouraging off-hour deliveries, for instance.

We asked Matt Powers, JLL’s Executive Vice President of Retail and E-Commerce Distribution his thoughts on buy-in for warehouse space. Matt said “I think communities and larger urban areas are wary of distribution-type use, but I think it’s up to the developer, community, and retail community to prove it’s not a traditional distribution model—not a lot of tractor-trailers coming in and out. These are going to be more box truck traffic because they’ll be servicing your community, not servicing your region.”

There is an irony to the fact that repurposing malls rendered obsolete by online shopping might represent one of the best ways to handle the huge logistics need of eCommerce players.

Beyond zoning, community members often object to mixed-use development, let alone faceless warehouse buildings showing up on their blocks. This will put pressure on warehouse owners to make these properties into more palatable presences. Realistically, owners have three ways of doing this. First, they can reduce the impacts of their warehouses on surrounding communities. Second, they can integrate better design into the warehouses themselves, and finally, by embracing mixed use. Neither of these options will be easy. While numerous developers have taken old warehouses and turned them into attractive new offices or other spaces, the needs of logistics space (high ceiling, good access, etc.) tend to get in the way of just lining the first floor with restaurants or other retail, as would be done with a traditional mixed-use development.

It will be up to the real estate owners to decide how best to navigate these community wants and needs. Bjarke Ingels Group has provided some inspiration here, by lining the Copenhill power plant with trails, a cafe and a rooftop ski hill. The huge expanse of walls and roof that warehouses offer certainly presents an interesting canvas for the more creative companies to play with. Perhaps sports courts could top future distribution facilities?

For his part, Matt explained that some companies, like Simon Properties, are developing warehouses by converting “obsolete class-C malls with a high vacancy rate but still around a population base so the land is viable.” These properties would have approximately 30% retail space and 70% industrial, allowing for local fulfillment as well as retail at the site itself.

The challenges of integrating warehouses into urban communities are broad and in many ways without precedent. There is an irony to the fact that repurposing malls rendered obsolete by online shopping might represent one of the best ways to handle the huge logistics need of eCommerce players.

At the end of the day, people’s insatiable need for more stuff, sooner, might overwhelm their interest in stopping distribution centers from popping up in their communities. On the other hand, it’s hard for consumers to connect the arrival of a new distribution center with faster, more convenient retail, particularly when leaders like Roger Claar have loud, clear and compelling reasons why more industrial space is not a good thing.

While the mayor of Bolingbrook’s goal may be to extract additional value from the tech giant, the episode serves as a crystallization of the fact that industrial owners need to start playing the community relations game. Owners of office, retail and multifamily are no strangers to the back and forth that comes with hotly-contested public approval processes. It’s time industrial owners get used to it, too.

Associate Publisher, Propmodo Research

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